Beginers Guide to Financial Happiness

I have been busy these last few days with work, visiting relatives and taking a short break ! More about that later. But I have also been busy visiting personal finance websites & blogs. Some inputs I have gleamed from relatives & friends.

I am listing down some of the things I have learnt in the past few days. Off course the journey of personal finance is a continuous one and needs to be updated. regularly. For people like me who are financially illiterate, personal finance / finance seems daunting. But I have realized that personal finance is some bits financial knowledge with a lot of common sense thrown in:)

So my random list of my new founded learning is as follows -

1. Use your ATM card wisely - If you are prone to visiting your local ATM so often that the watchman knows you by name, control yourself! Withdraw a sum weekly to start with and discipline yourself to not withdrawing cash on a regular basis. My bank’s ATM is two minutes away from my office, so some of my colleagues and I have got into a habit of running to the ATM. Money is available and how. And when we aren’t withdrawing money we are busy swiping the card!

2. Pause before you swipe – Its oh so easy to swipe your Debit / Credit card nd forget..but uncontrolled spending ensures that your bank balance diminishes even before you realize. Plus if you are the type who doen't pay your credit card dues on time, imagine the colossal waste of money in paying late fees / inerest etc . Once again discipline is the key!

3. Utilize your savings bank account - Keep saving whatever you can. Or try putting in money whenever you get a bonus / cash gifts or get your conveyance / mobile reimbursements. With RBI ruling that Savings bank accounts will earn more interest from next year, think of the passive income you can generate.

4. Cut your spending & Pay bills on time – Start trimming unnecessary expenses. Every penny saved is going to benefit you one day. Also pay your bills (utilities/ mobile etc)on time to avoid late fees.

5. Start a PPF account - Every little you put away for retirement will just increase your financial security. And PPF is one of the best options. On an average, if you put in Rs.70000/- per year for 15 years along with the interest you are looking at accumulating nearly Rs 21 lakhs (or more)!

6. Make a budget and stick to it - Analyze your expenses and make a workable budget. The mistake most of make when we start on a budget is that we make one which is not realistic. If I know I spend Rs 5000/- a month on commuting, (taking cabs to work and back) it’s unrealistic to think that I will take the train and share an auto all of a sudden. The realistic way according to me is to start with taking a cab to work one time and try the train / bus during the commute back. Likewise with other heavy expenses. Once we see the difference that we have saved at the month end, it will motivate us to the next level.

7. Update your resume regularly – Though its hard in today’s time to get offers, it’s a cardinal sin to send a dated resume (which supposedly many people do!) Network well and be open to offers. After all one never knows when layoffs may happen

8. Retirement Planning – Plan for your retirement today! It’s easy to relegate retirement planning to the back burner, but starting young is going to benefit only. Go through various plans, speak to friends & family or take the help of a professional financial advisor.

March 31 - End of another Financial Year

March 31! End of another financial year. Why is this date so significant to me? Because of the following reasons -

1. It signifies the end of another nightmarish financial year
2. It also signifies the last time i will see my full salary (will be seeing less of it from April thanks to our salary slashing)
3. It signifies the last day of my financial illiteracy. April 1 onwards will be different. I will finally plan and (try to) rectify my financial mistakes

April onwards I will be disciplined and plan for my retirement with a vengance! I hopw that in April 2010 I can look back with pride and say that for once I walked the talk!

New Pension Plan

If the NEW PENSION SCHEME is launched from May 1, 2009 it will allow all Indian citizens to join the scheme with a minimum investment of Rs 6000/- annually. Indian citizens can hope to receive pension through their life. While this is a brilliant move according to me, it is to be seen how the ground realities actually work out!

Pension is a security blanket that can cover (if planned correctly) potential cost of living post retirement. While this may not always suffice, given the state of economy or inflation at least some part can be covered. This in turn gives economic security and financial independence to senior citizens. Daily there are stories of how children throw out parents due to the economic burden (it is possible that the emotional connect is also zilch) as medical costs & day to day living costs are spiraling. Having a pension and therefore economic security will go a long way in allowing senior citizens to live with dignity. While on my financial journey, have realized of the many mistakes I made from my early career days. So some observations from my own mistakes –

1. Save EARLY! At the start of your career itself start saving – whether its tiny sums of money put away in FDs / Recurring Accounts /PPF / Life Insurance . Those who are savvy and understand the market, start investing in shares, MF or ETF. Off course this is apart from the mandatory PF.
2. Medical insurance is a key requirement. You can also invest in your parents’ name. This will help during times of medical emergencies.
3. Think of the future, yes at 22 or 24 you don’t want to think of your life at 60! But imagine the financial dependence on others or penny pinching at that age. Financial Goals will keep changing at various stages of life but keep planning & be disciplined.
4. Think of inflation. As the AEGON Religare Pension Plan ad conveys the message of inflation brilliantly (by my fav actor Irfan Khan) and tells us that savings / pension plans need to be based keeping inflation in mind. Think of pension plans early in life as you will have to pay lower premiums.
5. If you are not financially savvy take the help of a professional.
6. If you do invest in shares/ mutual funds keep track of your portfolio regularly.

Wednesday Blues?

Ya, I know Monday Blues is what is usually said....But what do you do when the mid week blues hit you and your colleagues?

Some of my colleagues are down in the dumps as they haven't been able to show their tax saving proofs, so their Salary will be depleted significantly this month. Some are sad as work is slowing down thanks to budget slashing and they are stuck with routine work. While others are gloomy as their investments are showing no signs of good returns. And the rest of us are worried due to our salary cuts, increase in living costs and zilch savings!

And to top it all we are now told that our good old birthdays will no longer be celebrated individually! Now all birthdays in a month will be celebrated together with ONE cake!!! In various different ways the message of economic downturn is coming close. Off course in my non gloomy state I see the positive side (that i still have a job!) and want to overcome this difficult time.

So all in all we sure are a gloomy lot in office. Hopefully Gudi Padwa will bring in some good luck & cheer.

March 31 deadline looming

Read this article http://www.dnaindia.com/report.asp?newsid=1240028 in DNA yesterday. Sandeep Shanbhag, director, Wonderland Consultants which is a tax and financial planning firm has been writing for many years and I like the advise that he gives. He explains stuff in very simple terms (yes, i really like that!). The article will work as a checklist for many with our march 31 deadline looming.

Thanks to the economic scare, i see freinds and colleagues actually thinking before spending. Its been a bonanza for the shopoholics as this year has seen so many sales across furniture, clothes, electronics categories already! Off course for people like me who live from salary to salary, this is another oppurtunity to realise the mistake of our foolish ways. Had I saved earlier and been wise earlier I wouldn't be in my penniless state. And now with our salary cut, I don't know how I am going to live.

There are quite a few articles on pension plans, savings, cost cutting, retirement plans etc on various blogs, websites.....plan to go through them over the next few days and make a list of the good ones for my next post.

Home....Mum....comfort

Was down with a bad bout of viral fever & throat infection...was feeling terrible not only from ill health but also from office blues and generally life. And what does a girl do then? She goes home to mum:)! I agree there's no place like home! Its strange that I still don't think of my rented pad as home. Maybe its me.

I thought I would die by the time i reached Pune, but one cup of mum's ginger tea got me breathing again. Yes, even the power cuts did not seem to bother me. Just being with my parents and being looked after by them somehow made me feel better. Ya, I know it sounds romantic...but being away from home makes you yearn for the comfort & love of family. I landed up unannounced and I realised how much my parents treasured having me with them. I loved it.

Thanks to my throat infection I could hardly speak but it was okay. The usual topics of marraige, settling down etc did rise its head - was oaky with it! I feel lucky that my parents are in Pune and I can reach them when I want without blowing away a fortune on travel. While I mumbled on salary cuts Dad advised on not giving up on saving. And coninuing my PPF . And the best thing was I came back with both edible and non edible goodiess!

Yes i am in my thirties but have to agree that parents with their unconditional love and home is taken for granted. As Robert Frost famously wrote " Home is the place where, when you have to go there, they have to take you in". Bless you Mum & Dad. I know am really lucky to have you in my life!

Life after salary slashing

A pall of gloom seems to hang over the office! While most department heads have sat with their teams individually, its understandable there is no good way to tell people that your salary has been cut. What i am seeing is that the office seems to have split into various groups....the ones who are taking it all in their stride, ones who are subduded and low in team spirit and others who are downright worried / tensed and increasing worries of others around.

While its understood that economies are static/ crashing etc most people feel that they won't be affected directly. I mean I was sad to know when some of my freinds/old colleagues saw their salaries shrinking or lost their jobs, but I kept thinking this wont happen to me.

As i have also been going through some personal finance research over the past month I have realised the value of long term planning! I am working for nearly 7 years now. If I would have worked on a financial plan from day one, I would have an substancial bank balance and a healthy savings plan today. Whereas I am living on a salary to salary basis today. Off course i have no one to blame but myself as i have been lazy & indisciplined.

As I had written earlier, that seeing the aegon religare ad, made me realise that cost of living / inflation is going to make such a huge difference in the future. In fact when i spoke to the aegon religare representative, he pointed out that i didn't have any fall back plan at all. other than mandatory PPF / insurance policy. Her I also have to be honest to say that if our economy wouldn't be in a crisis, I would still have been indiscreetly spending and putting off financial goals for later.

Probably amongst all this gloom & depression, the positive fallout is that people like me (and others off course) have woken up from slumber. And realisation has dawned that its only we ourselves who can make a difference. Yes financial planning requires knowledge, (or guidance from a proffessional), commitment and most importantly self discipline. Thirty years down I would want to be independent and finacially self sufficient. And only I can do it for my self!

Some flowers to cheer myself up!